Updates for the period ending May 31, 2017


 

CA Compliance Offset Pricing
CCO 8s Bid 10.55 Ask 10.85
CCO 8s are ARB-issued offsets available for spot delivery and subject to 8 years during which they may be invalidated.
CCO 3s Bid 10.85 Ask 11.15
CCO 3s are ARB-issued offsets available for spot delivery and subject to 3 years during which they may be invalidated.  The reduction to 3 years is achieved by having a different verifier successfully verify the project the following year.
CA Compliance Allowances Bid 14.25 Ask 14.30
Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total emissions. Prices shown are for the December futures contract.
CA Floor Price 2017 13.57  
The minimum price at which entities can purchase allowances in 2017.
Estimated CA floor price 2018 14.52  

Allowances are the permits entities purchase to emit in CA.  Entities can substitute offsets for up to 8% of their total (The minimum price at which entities can purchase allowances in 2018 increases by 5% annually plus CPI-U.

(Bid/Ask Prices are taken from multiple broker quotes for the period ended May 31, 2017. 2017 CA Floor price is the regulatory minimum auction price for allowances.  2018 estimate is based on regulatory rules and ClimeCo’s assumption of inflation in 2017 as measured by the CPI-U index.  Green numbers indicate positive changes during the month, red numbers indicate negative changes during the month, black numbers are unchanged.)

 

Offset Supply Information:
  • All CCOs issued to date: 62.65 million
  • Compliance credits awaiting issuance: 25.25 million
CA and General Market Commentary:
  • The current Cap and Trade program in California is authorized through 2020. The CA legislature is seeking to extend the authorization and to provide certainty about the program, but recent proposals have provided anything but certainty to the market- no progress was made in May, or in June to date, in moving toward a re-authorization bill. Uncertainty exists as to whether a bill will come in this current legislative session, with a 6/15/2017 deadline for the CA budget.
  • ARB’s May auction was fully subscribed for the first time since November, 2015. The auction had a bid-to-cover ratio of 1.23, and cleared at a price of $13.80, well above the $13.53 floor. The auction results in our view are a result of clarity provided by the ARB lawsuit decision. While the long-term fate of the program post-2020 is uncertain, firms now understand that they will have to comply at least through 2020, and so will have to make allowance and offset purchases to meet their obligation.


Questions?

Contact Derek Six, Senior Vice President of ClimeCo Corporation dsix@climeco.com or call 484.415.0501